ECONOMICS – who knows?
“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” (von Hayeck)
“History shows that where ethics and economics come in conflict, victory is always with economics. Vested interests have never been known to have willingly divested themselves unless there was sufficient force to compel them.” (Ambedkar)
“Economics is a subject that does not greatly respect one's wishes.” (Kruschev)
“It turns out that advancing equal opportunity and economic empowerment is both morally right and good economics, because discrimination, poverty and ignorance restrict growth, while investments in education, infrastructure and scientific and technological research increase it, creating more good jobs and new wealth for all of us.” (Clinton)
“Economics is not an exact science. It's a combination of an art and elements of science. And that's almost the first and last lesson to be learned about economics…” (Samuelson)
“A study of economics usually reveals that the best time to buy anything is last year.” (Allen)
Thomas Jefferson wrote that “The care of human life and happiness, and not their destruction, is the first and only object of good government”. James Madison added “If men were angels, no government would be necessary”. So let me begin by saying that this side of the new creation, government is necessary in a broken world, because we are not angels, we are weak, selfish humanity. Secondly, that government is an unenviable task. To have care and protection of the lives of over 60 million people plus those impacted around the world is a noble calling. Not one to be either taken on lightly nor criticised easily.
We live in times of turmoil. There are no easy answers. One of the primary tasks of the inevitable government is the management of tools that enable the economy. And the economy itself provides wealth, products and services to the population of the nation (and around the globe).
As the quotes above suggest, managing the economy is more art than science. And the reason for that is that faced with a series of economic levers, the reaction from pulling them is neither predictable nor consistent. Hence small changes constantly made are often more successful than large yanks on the biggest lever to see what happens.
One of the added complications is that the reaction to economic policy is actually the accumulation of millions of reactions of unequal weight. Every person makes a reaction to an economic announcement. Some with many pounds and others with pennies but they all count towards the result. And we react based on what we think might happen, on our hopes for the future. This in economics is called “confidence”.
When confidence goes the people react violently and in their own self-interest. A run on the pound or a fall in the stock market or the rise in the yield on gilts (caused by their price fall) is an immediate reaction to avoid losses. The spirals come when some sell and others then sell because of falling prices which leads to even lower prices, prospect of bigger losses and bigger sales and so it goes on.
Meanwhile some make money by having gambled on a crash.
The system of economics in the west is fundamentally based on desire for selfish gain and those incentives can drive productivity and growth. But when things move in the other direction those same powerful forces drive things down very rapidly.
And those with least often come off worst. Sometimes, through power imbalance, in either case. Growth or decline.
The current Chancellor and Prime Minister have been accused of dabbling in “A-level economics” with the economy of the UK. We have seen some very turbulent reactions to their plans. This is the result of instructing the Bank of England to reduce inflation with their one economic tool, interest rates, while going for growth by putting more money in people’s pockets by tax cuts.
It is akin, in the short term, to attaching an engine to each end of a train, pulling in opposite directions, and wondering why its not going anywhere.
And as John Maynard Keynes said “in the long term we are all dead”.
There is concern that while energy support is welcome, even at the cost of government borrowing, the effect of tax cuts, and ever more borrowing, on confidence has increased other costs , most notably mortgage rates and business loans, so that the overall effect will make problems worse.
While criticism of government doing a difficult job should not be done easily, it is also right to call out the wrong decisions that fundamentally undermine the first job of government – “the care of human life and happiness and not their destruction”.
As part of my musings on the current situation I asked a number of friends “What does a biblical economics look like?” The answers were inevitably varied but also reflective of CS Lewis’ reported view of politics – to be socially liberal and morally conservative.
One contributor suggested this short answer:
“both socialism and capitalism correctly receive certain biblical truths but they also ignore others. The Old Testament law envisages a small scale competitive market economy which allows for property and profit whilst ensuring a high level of equality and welfare protection for the vulnerable. I don’t believe lending money at interest is permissible in most circumstances. In contemporary terms this would be seen as irrational by orthodox economists because only a very small level of economic growth would be possible – but I think that equality is more important to God”
We can see this in a range of economic models in the Bible:
Holding of much wealth (1 Kings 10:23)
Economic planning (Genesis 41 and 47)
Obligation to work (1 Thess 5:14)
Provide for the poor (Lev 23:22)
Share amongst the community (Acts 2:44)
Share amongst the family (Ruth 2:20)
Giving of welfare fairly (Acts 6:1-6)
Jubilee – release from debt and revoke land ownership (for it is the Lord’s) (Lev 25)
We all may have a view about economic policy, social policy, industrial policy, education policy, health policy, welfare policy, environmental policy and international policy and how they should interact.
However you view these things, look to the Lord. And pray for our leaders, current and future, that they may have the heart of the Lord and the wisdom of the Lord to deal with matters for the Lord.
Until he comes again.
Then, we won’t need any policies.
For he will be our God and we will be his people.
And all will be made perfect.
Meanwhile commit our nation to Him, and fervently pray for all he requires.
For he has spoken to us through the prophet Micah:
He has shown you, O mortal, what is good.
And what does the Lord require of you?
To act justly and to love mercy
and to walk humbly with your God.
We pray this over our leaders and we also pray this over ourselves as we consider our hearts as we pray….
What a week!